Retention of Title Clauses

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School

Queensland University of Technology

Department

Law

Course

JSB171

Professor

All

Semester

Spring

Description

RETENTION OF TITLE CLAUSES
Plaintiff v Defendant
Here there is a Romalpa clause reserving ownership with [seller] until [payment of the purchase price].
OR
Here [seller] claims there is a Romalpa clause reserving ownership with [seller] until [payment of the purchase price].
This would be considered a contrary intention for the purposes of s21. The use of such a reservation of title clause is
facilitated by s22(1) which provides that property will not pass to the [buyer] unless/until the conditions of the clause are
fulfilled.
Extra: (Purpose) Romalpa clause usually used by seller to protect themselves from the insolvency of buyer where
the price is unpaid, and to defeat the claims of creditors with registered charges who would otherwise take
priority over seller.
1. WHAT IS THE AGREEMENT BETWEEN THE PARTIES?
IF Oral:
Here there is an oral agreement for _______. Under s6(1) this would still constitute a valid contract.
IF Written:
On the facts there is clearly a written contract for the ____________ b/w [buyer] and the [seller].
Does it form part of the contract?
To be effective, the ROT clause must form part of the contract: Style Finnish v Abloy; Chattis Nominees.
IF expressly part of the contract:
Here, the ROT clause is clearly an express term of the contract.
IF not expressly part of contract BUT on an invoice:
Similarly to in Style Finnish, [Seller] is wishing to establish that the ROT clause [on the receipt] forms part of the
contract. Prima facie this will not be effective, because it is a unilateral attempt to impose conditions, in the
absence of any agreement: Style Finnish.
IF course of dealings established and no objection from buyer:
However here, applying the decision in Chattis Nominees, there is a course of dealings between (buyer)
and (seller), over (time period – preferably years), and there has never been an objection from (buyer).
Therefore it is likely that the clause has been incorporated into the contract.
IF objection by buyer OR no prior dealings:
Here, applying the decision in Chattis Nominees, there is [no prior dealings/an objection by the buyer]
and therefore Chattis Nominees can be distinguished and it is likely that the clause would be considered
unilateral and therefore no incorporated into the contract without any agreement.
Example:
• Style Finish v Abloy: Invoice relied on to establish a ROT clause as a term of the contract; HELD: ROT
clause on a receipt/invoice was a unilateral attempt to impose contractual conditions, and therefore wasn’t
effective, in the absence of an agreement.
• Chattis Nominees: Dealings spanning some years and many deliveries; seller argued the regularity of
dealings indicated in the absence of any objections, an acceptance that the term has been incorporated
into the contracts; HELD (Cohen J): Was an effective clause.
2. WHAT IS THE EFFECT OF THE ROT CLAUSE?
The effect of the clause must be decided on its particular wording: Chattis Nominees.
Here, consider the effect of clause on:
(These are outlined below – apply as necessary)
a) Are the [goods] in [buyer’s] possession available?
b) What claim does [seller] have over the [mixed/manufactured/incorporated] [goods]?
c) Are [seller’s] entitled to the sale proceeds? a) Are the [goods] in [buyer’s] possession available?
Romalpa held effect would be given to the clause where goods were in possession of buyer and have not been
resold or incorporated into other products or altered and they remain identifiable.
IF goods are separate and identifiable:
Here, similar to in Rompala, it appears that the clause would operate to cover (goods) as they are easily
identifiable and distinguishable as those goods supplied by [seller].
Example:
• Rompala: Foil rolls distinguishable and stored separately for ease of identification. It was
conceded that the clause covered such items.
IF goods are not easily identifiable:
Here, Rompala would be distinguished, because (goods) have not kept separate and it is unlikely that the
they could be identifiable. This results in practical difficulty when identifying what [goods] were
supplied by [seller] and therefore it is unlikely, in the absence of identifying the goods that seller would
be able to rely on the clause.
b) What claim does [seller] have over the [mixed/manufactured/incorporated] [goods]?
Here, the clause seems to have a common basis with, the clause which was considered in [pick Rondo or
Romalpa].
Cases:
a) Rondo: “Buyer shall be at liberty to agree to sell products (independently or affixed to other materials)
subject to the condition that until payment of the price, the buyer shall sell as agents and bailees for (seller)
and that the entire proceeds from sale thereof shall be held in a separate account in trust for (seller).”
b) Romalpa: “If buyer mixes these goods with others or uses these goods to make new product, then seller to
have property in new product from time of mixing or manufacture as security for full payment by buyer;
Buyer to keep products for seller as fiduciary owner, buyer must store product so that it is clearly the seller’s
property; Buyer may sell in ordinary course of business and must assign to seller claims buyer has against
sub-buyer.”
IF clause is similar to Rondo:
In that case, the clause operated to reserve title until all payments made. The clause in effect created a
bailment relationship and authorised the buyer to install products on terms and affix it to property so that
Rondo and 3 party become tenants in common.
IF clause is similar to Romalpa:
In that case the clause stated that the seller had property in the new product from the time of mixing. The
court didn’t consider the effect and scope of that clause in that case. A similar clause was however considered
in Rondo BS v Casaron. In that case a clause the clause operated to reserve title until all payments made. The
clause in effect created a bailment relationship and authorised the buyer to install products on terms and affix
it to property so that Rondo and 3 party become tenants in common.
IF goods affixed to realty:
Here, like in Rondo, the goods have been incorporated into realty as [foundation, structure of the building]. In
Rondo, it was admitted that property had passed when the steel was combined as realty and Rondo became
entitled to maintain an action for the price of the goods under s50(1). Similarly here the clause would not operate
as the goods are not readily identifiable or severable from [realty]. Therefore it is necessary to consider whether
an action to trace the proceeds can be brought.
IF goods mixed somehow:
Here the goods have been mixed with [other goods] to make ________